PIMCO Global Multi‑Asset Strategy: Q&A with Mihir Worah

Summary

The combination of the outlook for higher rates and rising inflation with fair to rich valuations and meager starting yields means that investors should expect lower returns from most asset classes in the future. In other words, the tailwind is about to fade.

We believe compelling returns can still be generated, but investors will need to broaden their opportunity set and adopt a more tactical approach.

This strategy is designed to be a comprehensive asset allocation strategy for the market environment we are in now and likely to face going forward.

Q: Since the financial crisis, a buy-and-hold approach and static balanced strategies have worked well for many investors. Why change now?

Mihir Worah:
Following the rising tide of economic stimulus via global monetary policy and quantitative easing, many asset classes have experienced exceptionally strong
returns since the financial crisis. Higher valuations have been supported by falling inflation and lower interest rates.

But we believe this tailwind is about to fade and as a result, static buy-and-hold strategies are likely to deliver lower returns. As the U.S. Federal
Reserve and other global central banks look to raise rates and inflation is poised to recover, the combination of higher rates with fair to rich valuations
and meager starting yields means that investors should expect lower returns from most asset classes in the future. Furthermore, volatility, which has been
largely subdued lately, is also likely to rise.

To be sure, we believe compelling returns can still be generated, but achieving them will require approaching portfolio construction differently. Most
importantly, investors will need to broaden their opportunity set and adopt a more tactical approach. For example, if you look across multiple economic
cycles across all major asset classes, the spread between the top and bottom performing asset class has been 45%* on average. That is a big number. It
means there is a lot of room year-after-year to increase return potential and to seek to avoid risks by being tactical. With low long-term return prospects
for traditional asset classes, as we recently highlighted in our Secular Asset Allocation Outlook, we believe active management will become an even more
important driver of return.

Q: How would you describe the goals of PIMCO Global Multi-Asset Strategy? Where does it fit in?

Worah:
Global Multi-Asset is designed to be a comprehensive asset allocation strategy. Our objective is to deliver meaningful outperformance on a consistent basis
over a benchmark of 60% Global Stocks and 40% Global Bonds1, (which essentially is the market portfolio) with a similar risk profile. We manage
the portfolio very tactically – allocations can shift quickly as market conditions evolve – but we have clear risk guardrails. Ultimately, our goal with
this strategy is to provide investors with access to PIMCO’s highest conviction macro and relative value ideas in a single package with daily liquidity.

Global Multi-Asset can fit in many places within an existing asset allocation. As the portfolio is highly diversified and global, the strategy can serve as
a core portfolio holding. Some investors are also using it as a key component of the global tactical asset allocation bucket.

I think Global Multi-Asset is especially well designed for the market environment we are in now and likely to face going forward. Our broad opportunity
set, coupled with guideline flexibility, provides us the ability not only to source the most attractive investment opportunities, but also to meaningfully
take risk off the table if conditions warrant.

Q: Since you became lead portfolio manager in January 2014, Global-Multi Asset has delivered excellent performance. In the past twelve months as of
June 30th, the strategy outperformed 99% of its Morningstar category peers. What changes have you made since assuming the leadership of this strategy?

Worah:
Yes, I’m pleased with our performance thus far and feel very confident we can continue to deliver.

Since assuming lead PM responsibilities, I have made several changes. Before I delineate them, let me provide our readers with a brief background. Global
Multi-Asset was launched in late 2008 on the heels of the global financial crisis. Unfortunately, the performance until early 2014 was not up to PIMCO
standards. In particular, 2013 was a very challenging year for this strategy.

Now Global Multi-Asset has an entirely new portfolio management team. We have evolved the investment process and significantly increased the involvement of
our Portfolio Analytics team. Finally, we have updated the benchmark of the strategy to provide complete style clarity to investors.

The changes we have made seem to be working. Despite the strategy retaining its name and full historical track record, the performance since January 2014
represents the stewardship of my team and our tactical style of management. As investors consider an investment in this strategy, I hope they will consider
Global Multi Asset’s track record that reflects the changes I have led going into effect, and that investors recognize PIMCO’s commitment to delivering a
world-class asset allocation strategy.

Q: So what have been the key drivers of performance recently?

Worah:
Our performance has been driven by a diverse range of investment strategies, both macro and bottom-up. On the macro side, our region and country selection
in equities, as well as being long the U.S. dollar, were key contributors. We were also able to add alpha by sourcing bottom-up opportunities from PIMCO’s
deep bench of analysts.

As markets have delivered returns in a lumpy fashion, our tactical management of positions also played a critical role. For example, two key conclusions
from our Cyclical Forum in late 2014 were that European and Japanese equity markets were attractively valued and would benefit from significant
quantitative easing programs. While it was the right call, our tactical management of these positions – in particular, actively managing currency risk and
reducing risk ahead of the recent turbulence in Greece – were particularly beneficial.

Another point I would stress: it’s not just about picking the right regions or countries; instrument selection matters a lot too. For example, last year in
2014, we invested primarily in on-shore Chinese A-shares3 as they were more attractively valued vs. off-shore H-shares2, which proved
to be a very good trade. However in 2015, we transitioned our exposure to the offshore H-share market as the valuation scale was tilted much more in their
favor at the beginning of 2015. While Chinese equities across both onshore and offshore indices have sold off this year, we were much less affected as the
recent sell-off had an outsized impact on the locally listed onshore A-shares.

Q: You mentioned the entire team is new, can you provide a bit more background on some of them?

Worah:
Asset allocation is a strategic priority for PIMCO and we have invested heavily in this area. I’ve always tried to build my teams with the best investors
in the world, and the team I’ve put together for Global Multi-Asset is no exception. Since I assumed lead PM responsibility, three additional portfolio
managers have joined the team, all accomplished investors with impressive track records. Some came to PIMCO from highly respected global macro hedge funds.

Geraldine Sundstrom, who is now co-lead portfolio manager with me on the strategy, is an exceptional investment talent and has 17 years of experience
investing across the capital structure and asset classes at Brevan Howard and Moore Capital. Geraldine’s extensive background in emerging markets further
bolsters our investment expertise in those key regions. In addition to Geraldine, Rahul Devgon has joined the team. Rahul was previously at Moore Capital
and contributes cross-asset and relative value strategies to the portfolio. He is a seasoned investor with 17 years of global macro and relative value
trading experience. Finally, Nic Johnson, a longstanding member of our real return team and someone I have worked closely with for the past 10 years, is
also now part of the team. Nic contributes real assets and bottom-up ideas to the portfolio. But we don’t rely on just this immediate team to drive
results. Mohsen Fahmi and Lorenzo Pagani, both senior portfolio managers and managing directors, also contribute relative value strategies. A large portion
of our success thus far has been driven by our ability to leverage the full PIMCO platform and global resources.

Q: Global tactical asset allocation is a pretty broad category. How should investors think about PIMCO Global Multi-Asset relative to other offerings?

Worah:
We see the strategy as having three key differentiating features, that should provide us with an edge.

First, as I just discussed, is the team. The investment talent we have is typically accessible only through investments in top macro hedge funds, which
tend to have lock-ups and fee structures that include both management and performance fees. Investors in Global Multi-Asset can access the same caliber of
talent, albeit in a structure that provides daily liquidity and a fixed fee.

Second, PIMCO is one of the very few asset managers that combine a top-down macro investment process with significant bottom-up research expertise. Our
top-down investment process is well known and our track record over the past 40 years stands as evidence of its efficacy. What may be less well known is
our deep bench of over 260 portfolio managers and 60 research analysts providing valuable bottom-up insights and ideas across all asset classes. Our
top-down process helps identify key macro catalysts and market turning points, while our bottom-up expertise helps us get the most out of every asset
class. It’s this combination that’s been the key to our success. I believe very few other firms have the platform and asset class expertise that PIMCO has.

Finally, I believe the breadth of our opportunity set provides us a greater ability to capitalize on what we expect will be increasingly divergent sources
of potential returns in the years ahead. We invest across the full spectrum of liquid asset classes, including developed and emerging equities and bonds,
real assets, currencies and alternative risk premia strategies such as managed futures and merger arbitrage. We also have a diverse array of instruments to
draw on: We can gain exposures via individual securities, PIMCO mutual funds and PIMCO or third-party ETFs. This allows us to be quite precise and target
exactly what we want. This, plus PIMCO’s global presence and access, allows us to source attractive opportunities we believe may not be available to many
investors.

These are our key differentiators and should give us an edge in the environment ahead.

1
The strategy seeks total return, which exceeds that of a blend of 60% MSCI All Country World Index/40% Barclays Global Aggregate Index (USD Hedged).

2
As represented by the HSCEI Index, local currency total return

3
As represented by the SZCOMP Index, local currency total return

Summary

The combination of the outlook for higher rates and rising inflation with fair to rich valuations and meager starting yields means that investors should expect lower returns from most asset classes in the future. In other words, the tailwind is about to fade.

We believe compelling returns can still be generated, but investors will need to broaden their opportunity set and adopt a more tactical approach.

This strategy is designed to be a comprehensive asset allocation strategy for the market environment we are in now and likely to face going forward.

The Author

Mihir P. Worah

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Disclosures

Investors should consider the investment objectives, risks, charges and expenses of the funds carefully before investing. This and other information
are contained in the fund’s prospectus and summary prospectus, if available, which may be obtained by contacting your investment professional or PIMCO
representative or by visiting www.pimco.com. Please read them carefully before you invest or send money.

A word about risk:
Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The
value of most bonds and bond strategies is impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive
and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases
this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments
may be worth more or less than the original cost when redeemed. Equities may decline in value due to both real and perceived general
market, economic and industry conditions. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to
currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Commodities contain heightened risk,
including market, political, regulatory and natural conditions, and may not be suitable for all investors. Derivatives and commodity-linked derivatives may involve certain costs and risks, such as liquidity, interest rate, market, credit,
management and the risk that a position could not be closed when most advantageous. Commodity-linked derivative instruments may involve additional costs
and risks such as changes in commodity index volatility or factors affecting a particular industry or commodity, such as drought, floods, weather,
livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Investing in derivatives could lose more than the
amount invested. The fund invests in other PIMCO funds and performance is subject to underlying investment weightings which will vary. The cost of
investing in a fund that invests in other funds will generally be higher than the cost of investing in a fund that invests directly in individual stocks
and bonds.

SZCOMP Indexis a market-cap weighted index that tracks the stock performance of all the A-share and B-share lists on Shenzhen Stock
Exchange. HSCEI Index is a free-float capitalization-weighted index comprised of H-Shares listed on the Hong Kong Stock Exchange and included in the Hang
Seng Mainland Composite Index. It is not possible to invest directly in an unmanaged index.

The minimum initial investment for Institutional class shares is $1 million; however, it may be modified for certain financial intermediaries who submit
trades on behalf of eligible investors.

Pacific Investment Management Company LLC (“PIMCO”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). PIMCO Investments LLC (“PIMCO Investments”) is a broker-dealer registered with the SEC and member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). PIMCO and PIMCO Investments is solely responsible for its content. PIMCO Investments is the distributor of PIMCO investment products, and any PIMCO Content relating to those investment products is the sole responsibility of PIMCO Investments.
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Pacific Investment Management Company LLC (“PIMCO”) is an investment adviser registered with the U.S. Securities and Exchange Commission (“SEC”). PIMCO Investments LLC (“PIMCO Investments”) is a broker-dealer registered with the SEC and member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). PIMCO and PIMCO Investments is solely responsible for its content. PIMCO Investments is the distributor of PIMCO investment products, and any PIMCO Content relating to those investment products is the sole responsibility of PIMCO Investments.
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